Financial Factors Affecting the Russian Nuclear Triad

1
Financial Factors Affecting the Russian Nuclear
Triad

• LT Rich Lesiw, USN

2
Background

• In 2002, Russia and the United States agreed to
  conclude the Moscow Treaty (also known as the
  Strategic Operational Arms Treaty, SORT)
• By 31 December 2012, both sides will have reduced
  their arsenal to between 1,700 and 2,200
  operationally deployed nuclear weapons.
• With Russias aging nuclear triad (ICBMs, bomber
  aircraft, and ballistic missile submarines) this
  range fits into the prospective budget

3
Budgetary Goals

• Military Reforms
• Attempting to create a professional military
• Modern Weaponry
• Shift from World Wars to localized conflicts

4
Defense Budget

• Russian defense spending accounted for the
  following as a percentage of GDP 4.23 in 2004,
  3.72 in 2005, and 4.11 in 2006
• Although it appears to be no significant changes,
  once inflation is factored in the actual rate of
  growth in defense spending has broadly matched
  growth in the economy at large.
• Due to the complexity of the defense budget,
  these figures do not include all military
  expenditures

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Budgetary Issues

• Improper alignment of priorities
• RD / Procurement vs. Personnel
• In the past the ratio had 70 percent of the money
  going to personnel, and in 2006 only 60 of the
  funds were allocated for personnel.
• Goal is to achieve a 50-50 ratio.

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Budgetary Benefits for Nuclear Weapons

• Based on the published military doctrine, the
  pursuit of a strengthened nuclear force structure
  would be more beneficial.
• In the 2007 budget, the nuclear forces received
  12,099 billion rubles and each year these figures
  are projected to rise.
• By 2010, the amount of money that these forces
  receive will have more than doubled in nominal
  terms to 25,256 billion rubles.
• Nuclear forces have received 100 of the money
  that they have requested over the last several
  years

7
Financial Impediments

• Although massive rubles are being appropriated to
  the nuclear forces, the basic infrastructure is
  being neglected
• One major problem facing the nuclear forces at
  their bases is the influx of organized crime.
• One of the factors explaining these thefts may be
  the low pay of the military.
• In 2007 the pay went up 10 on 1 January, and 15
  on 1 December and a new food ration was
  introduced to the servicemen. These three
  raises amount to a 30 increase in pay during
  2007.
• Physical status of the bases.

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Financial Security

• The defense budget for 2008-2010 is based on an
  increasing GDP with a growth rate averaging about
  6 percent a year through 2010.
• Is Russia a petrostate that will be in distress
  if oil prices collapse or is its economy diverse
  enough to withstand an oil price drop?

9
Financial Security

• The World Bank reports that from 1998 through
  2006 the Russian GDP grew almost 60 and the
  poverty rate in the country was cut in half
• Inflation
• In 2006 inflation in Russia was only down to
  9.7, which was the highest level in all Central
  and Eastern European countries
• The inflation rate settled at 7.8 percent in May
  2007, and it is expected to stay around 7 percent
  through 2009.

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Financial Security

• Even with this inflation rate, the International
  Monetary Fund (IMF) credits high oil prices and a
  better financial plan with assisting the massive
  growth in the Russian economy
• Short Term Good Long Term Needs work

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Financial Security

• In order to lessen its dependence on high oil
  prices, the Russian Federation has been reducing
  its reliance on oil as the prime source of income
• Diversification
• Arms Exports

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Conclusion

• Fortunately for the nuclear triad there currently
  is no money shortage and with the continued
  global demand for oil, it appears that no
  shortage is on the horizon.
• The Russian Federation appears to have learned
  from its mistakes in the late 1990s, and it has
  started to accumulate massive reserve funds that
  might (if sufficient funds were reserved) carry
  it through a crisis.